Five Things You Should Be Doing in the New Year

Five Things You Should Be Doing in the New Year to Prepare For Tax Season

Whether 2022 was a banner year for your business, or you had some challenges, now is the time to reflect on the past year and determine what you want to achieve moving forward. You’ve set yourself up for success by following some simple steps before the end of the year last year. Now is the time to examine further ways to prepare yourself for the 2023 tax season. Here are five recommendations worth exploring.

  1. Maximize Your Deductions
    You’ve already done the work of reviewing your expenses at the end of last year. Now it’s time to make sure you’re taking advantage of all the deductions available to you. Remember, you can only deduct the portion of an expense that is related to your business. For example, if you use your car for both business and personal use, you can only deduct the portion of the expense that is for business use. If you have a home office, you can deduct a portion of your rent or mortgage interest.
  2. Review Your Business Structure
    What business structure did you start with, and are you still using it? Maybe it’s time to reevaluate whether it’s still the best option for your business. If you’ve grown significantly since starting your business, you may want to consider converting to a C corporation. It is important to talk to a tax professional to help you determine the pros and cons based on your situation.
  3. Understand the Tax Implications of Remote Employees
    Did you offer remote work in 2022 to retain employees or gain new ones? If so, you should be aware of and plan for the tax implications. Make sure you are compliant with all the payroll tax and state filing obligations. Employees located in other countries could make things even more complex. Your tax advisor can help with sorting through these challenges.
  4. Create a Plan Now for Paying Taxes
    The sooner you understand  your business’s general outlook for the tax year, the better prepared you will be to pay taxes come April. Thinking ahead in January about what you may owe in April can prevent liquidity problems at tax time. Work with your accountant to estimate the tax due, so you can invest the difference and potentially be better prepared for the eventual payment.
  5. Consider Equipment Deductions and Green Energy Tax Credits
    If you purchased new or used equipment for your company and started using it before December 31, 2022, you could be entitled to a federal income tax deduction for 2022. Now may also be a great time to consider green improvements for your business. The federal Inflation Reduction Act includes nearly $400 billion for clean energy tax credits and other provisions aimed at combating climate change. These include tax credits for buying new or used electric or hybrid clean vehicles, installing residential energy property, and other steps. As always, check with your tax advisor on which credits might be available to you.